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Wow, "great advice" from Simplii
August 10, 2020
3:25 pm
rhvic
Victoria, BC
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Got this from Simplii:
----------------

Set it and forget it! You can put your savings on autopilot with Simplii Financial recurring transfers no matter what your saving goals are. With even a small monthly transfer from your No Fee Chequing Account to your High Interest Savings Account or Tax-Free Savings Account you could see a big difference.

Easy, flexible recurring transfers
• The more you save, the more interest you earn – and the more your money grows!
• Weekly, monthly or every quarter. Choose how much money to transfer, and how often.
• Get set up in 2 simple steps with online or mobile banking.
1. Select “Transfers” or “Transfer Funds” on the left menu once you’ve signed on
2. Complete the transfer by filling out your transfer details, including the amount and how often.

--------------
Just imagine, I can automatically move funds from their chequing account (at 0.05%) to my HISA account (at 0.20%). Who wouldn't leap at such 'attractive' rates for a "big difference"?

Are they really this naive?

Instead, my money simply left Simplii for an FI which pays much higher interest rates.

August 10, 2020
3:59 pm
pooreva
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Tell me, honestly, how many people are actually aware of Other FI than big5 which pay SOME interest on your savings instead of 0.XX% ???
And how many of those trust some virtual bank having web site or being in some other province?

Thus offer to move money form account paying 0.05 to account paying 0.20% sounds FANTASTIC to them...

August 10, 2020
5:33 pm
Vatox
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pooreva said
Tell me, honestly, how many people are actually aware of Other FI than big5 which pay SOME interest on your savings instead of 0.XX% ???
And how many of those trust some virtual bank having web site or being in some other province?

Thus offer to move money form account paying 0.05 to account paying 0.20% sounds FANTASTIC to them...  

I’m thinking that the majority of Canadians don’t even have savings and nothing grows.

August 10, 2020
5:48 pm
Oscar
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I think they could have stated it a little differently considering they are an online bank . For those not with Simplii the subject line was : " A simple hack to grow your savings " . I wish I had the skills to to do just that.

August 10, 2020
6:02 pm
AltaRed
BC Interior
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Vatox said

I’m thinking that the majority of Canadians don’t even have savings and nothing grows.  

I am not so sure about that but I do agree with Pooreva the majority are not likely looking outside their brick and mortar offerings whether the Big 6 or their local CUs.

That said, Home Capital said in their most recent quarter that their Oaken retail offering is about 27% of their deposit base. That is a pretty good uptake.

August 10, 2020
6:08 pm
Norman1
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The 0.20% is reasonable for what is offered: An insured retail deposit with CIBC that has a DBRS long-term rating of AA and short-term rating of R-1(high).

If one looks at the wholesale money market, banker's acceptances with less than 30 days to maturity, no deposit insurance, and stamped by RBC or BMO are being offered for around 0.20% to 0.25%. That's with a $50,000 minimum purchase!

Keep in mind that with their strong debt ratings, the Big 5 Banks can borrow at provincial bonds rates and don't have to pay what are essentially junk bond rates for funds.

August 10, 2020
6:28 pm
Norman1
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AltaRed said

I am not so sure about that but I do agree with Pooreva the majority are not likely looking outside their brick and mortar offerings whether the Big 6 or their local CUs.

That said, Home Capital said in their most recent quarter that their Oaken retail offering is about 27% of their deposit base. That is a pretty good uptake.

That is good for Home Capital's goal of diversifying from their deposits through the deposit broker and advisor channels. But, it is only about $3.7 billion.

In contrast, CIBC has $187 billion in deposits through its Canadian personal and business banking side, without having to pay anywhere near what Oaken pays on deposits.

With that reality, there is no incentive for CIBC to match the rates of someone like Oaken.

August 10, 2020
6:54 pm
AltaRed
BC Interior
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Oh, I was not suggesting any of the big 5 or 6 needed to compete with online offerings. Quite the contrary.

My response was to the statement that savers don't look beyond their big brick and mortar banks. Some clearly do. Collectively it may not add up to $50B across the online industry, but it is more than peanuts.

August 10, 2020
9:08 pm
Loonie
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I recall that, a few years ago, perhaps five years?, the experts were saying that the virtual banks would never have more than about 3% of the retail market. To me, that seemed too low, as "ever' is a long time.
I wonder what it is now.

Why would the DBRS rating matter, unless you are planning on putting more than CDIC limits into the FI or buying their bonds or shares? There is a potential risk, with GICs, that if the FI went under, your GIC would be terminated early and you would lose your premium rate, but that isn't too likely in most cases and is not worth the difference between, say, 0.05 to 0.20% and 1.75%.

August 10, 2020
9:22 pm
AltaRed
BC Interior
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DBRS rating is mentioned to characterize what FIs need to pay to attract deposits. Clearly CIBC only needs to pay 0.1-0.2% to attract deposits (commercial paper, banker's acceptances and uninformed retail investors) when online banks need to pay 1.5-1.8% to attract smart retail investors.

Norman is looking at it from the FI's point of view, not the retail depositor's perspective.

We can denigrate the big banks all we want but it is they who have the last laugh in terms of what they need to pay to fund their business.

So the system works for everyone.

Edit: I'd also be curious what share of the deposit market the online retail banks have vs the overall retail market. It clearly isn't yet big enough to 'unsettle' the competition.

August 10, 2020
9:35 pm
Norman1
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DBRS debt ratings matter because they open the door to large depositors out there who have way more funds to deposit than the $100,000 CDIC limit. For example, the large pension funds, like CPP, and large employers who have $5 million payrolls every two weeks.

If a financial institution gets a long-term rating of AA or a short-term one of R-1, then a large depositor, like CPP, could come along and offer to deposit $100 million for 30 days for just ½% per annum.

With those kinds of depositors knocking at the door, the financial institution will have a hard time caring much about sub-$100,000 deposits from us retail depositors.

As AltaRed wrote, those, like the big banks, with such a strong debt rating do have the last laugh in the deposit taking game in which they can pay 1/5 or less for deposits than others.

August 10, 2020
10:57 pm
Vatox
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AltaRed said

I am not so sure about that  

I’m pretty sure that people living paycheque to paycheque and on credit, do not have savings.

This article is less than a year old and I’m sure the pandemic has made things worse and added more people to the list.

https://www.investmentexecutive.com/news/research-and-markets/majority-of-canadians-living-paycheque-to-paycheque-survey-2/

August 10, 2020
11:53 pm
Norman1
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Loonie said

… There is a potential risk, with GICs, that if the FI went under, your GIC would be terminated early and you would lose your premium rate, but that isn't too likely in most cases and is not worth the difference between, say, 0.05 to 0.20% and 1.75%.

It is not a problem for someone if the GIC were terminated early and one receives the principal back early. However, there could be a serious problem if there is a default and the principal or interest is late.

Rob Carrick warned about that during the Home Capital turmoil that resulted in market leading GIC rates.

Someone who buys a 5-year GIC, with the interest compounded until maturity, can likely tolerate the principal and interest being a few days or a few weeks late in five years time should there be a default around then.

Not so when someone buys a 5-year GIC and has the interest paid out monthly to cover living expenses. A default could result in a late monthly payout of interest.

Unlike CMHC mortgage insurance, CDIC deposit insurance does not guarantee timely payment of interest. CDIC guarantees eventual payment of the interest. So, the risk of default, estimated by DBRS, S&P, and Fitch debt ratings, matters in such cases.

August 11, 2020
11:47 am
AltaRed
BC Interior
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Vatox said

AltaRed said

I am not so sure about that  

I’m pretty sure that people living paycheque to paycheque and on credit, do not have savings.

This article is less than a year old and I’m sure the pandemic has made things worse and added more people to the list.

https://www.investmentexecutive.com/news/research-and-markets/majority-of-canadians-living-paycheque-to-paycheque-survey-2/  

Despite that, and behind paywall, but per https://www.theglobeandmail.com/business/article-canadians-reduced-household-debt-in-pandemic-as-government-programs/

Canadians shrank their credit card debt and paid down their lines of credit in the early months of the pandemic, as massive government aid and loan deferral programs took some of the pressure off household finances.

The credit card utilization rate – the share of available credit that consumers used – fell to 21.24 per cent at the end of July from 23.96 per cent at the end of January, according to new data from credit reporting agency Equifax.

The data also show the balance across all credit cards in Canada dropped to $89.6-billion at the end of July from $102.8-billion at the end of January. The utilization rates for unsecured lines of credit also declined, to 29.4 per cent at the end of July from 31.5 per cent at the end of January, with balances dropping to $41.4-billion from $43.8-billion. Delinquency rates for credit cards and lines of credit both have fallen slightly.

It remains to be seen what happens once government handouts cease. Will the trajectory turn around to higher debt again?

None of that says how the rest of us are depositing our assets in big banks vs the online retail offerings, or what that trend is. Without some data, we are all speculating.

Added: Don't know if https://www.bankofcanada.ca/rates/banking-and-financial-statistics/chartered-bank-selected-liabilities-monthly-average-formerly-c2/ tells us anything, but by selecting all the buttons under Personal Deposits, there is $1.148 trillion in personal deposits in chartered banks alone.

Breaking it down further to potentially cash only, there is $355B in chequable, $108B in tax sheltered non-chequable and $272B in Other (presumably taxable savings accounts). None of that includes term deposits.

August 11, 2020
2:10 pm
MapleOne
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rhvic said
Got this from Simplii:
----------------

Set it and forget it! You can put your savings on autopilot with Simplii Financial recurring transfers no matter what your saving goals are. With even a small monthly transfer from your No Fee Chequing Account to your High Interest Savings Account or Tax-Free Savings Account you could see a big difference.

Easy, flexible recurring transfers
• The more you save, the more interest you earn – and the more your money grows!
• Weekly, monthly or every quarter. Choose how much money to transfer, and how often.
• Get set up in 2 simple steps with online or mobile banking.
1. Select “Transfers” or “Transfer Funds” on the left menu once you’ve signed on
2. Complete the transfer by filling out your transfer details, including the amount and how often.

--------------
Just imagine, I can automatically move funds from their chequing account (at 0.05%) to my HISA account (at 0.20%). Who wouldn't leap at such 'attractive' rates for a "big difference"?

Are they really this naive?

Instead, my money simply left Simplii for an FI which pays much higher interest rates.  

HeHe, I got that email and was thinking of posting EXACTLY what you said.
You virtually took the words out of my mouth.

I miss the old PCFinancial days, at least they had a decent interest rate.

August 11, 2020
2:25 pm
Loonie
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October 21, 2013
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Norman1 said

Loonie said

… There is a potential risk, with GICs, that if the FI went under, your GIC would be terminated early and you would lose your premium rate, but that isn't too likely in most cases and is not worth the difference between, say, 0.05 to 0.20% and 1.75%.

It is not a problem for someone if the GIC were terminated early and one receives the principal back early. However, there could be a serious problem if there is a default and the principal or interest is late.

Rob Carrick warned about that during the Home Capital turmoil that resulted in market leading GIC rates.

Someone who buys a 5-year GIC, with the interest compounded until maturity, can likely tolerate the principal and interest being a few days or a few weeks late in five years time should there be a default around then.

Not so when someone buys a 5-year GIC and has the interest paid out monthly to cover living expenses. A default could result in a late monthly payout of interest.

Unlike CMHC mortgage insurance, CDIC deposit insurance does not guarantee timely payment of interest. CDIC guarantees eventual payment of the interest. So, the risk of default, estimated by DBRS, S&P, and Fitch debt ratings, matters in such cases.  

Yes, that could be a concern for people who hold all their money in one bank or funnel it all through one bank. I would not advocate this.

This issue is probably a bigger concern for people who have little to no savings. That does not appear to apply o most people on this forum.

Please write your comments in the forum.